The Philippines Moves Forward, But Not Far Enough

A vendor sells fruit on a street south of Manila on Jan. 30. The Philippine economy expanded by 7.2% in 2013 despite a devastating typhoon and a powerful earthquake that slowed its performance in the last quarter.

European Pressphoto Agency

The Philippines is making progress on reforms proposed by foreign business leaders to create jobs and make the country more competitive. But they say more is needed for the country is to realize its full potential.

The Philippine economy expanded by 7.2% in 2013 after gaining 6.8% the previous year, making it the fastest growing economy in Southeast Asia. Thanks to rising exports, the impact of the massive typhoon that ripped through the central part of the country last November did little to crimp that growth.

But the Philippines, once known as the sick man of Asia, still compares poorly with several of its Southeast Asian neighbors as a destination for foreign companies, say business leaders.

While growth of 7.2% “sounds good,” said Ian Porter, the president of the Australia-New Zealand Chamber of Commerce, “it’s too low.”

“It should be 9%,” he added, during the recent launch of a report by the Philippines’ Joint Foreign Chambers of Commerce.

Mr. Porter said red tape and slow decision-making are holding the country back, making it harder for Philippine companies to compete overseas and dissuading foreign companies from setting up here.

Former Philippine Finance Secretary Roberto de Ocampo gives a speech during the Arangkada Philippines Forum in Manila on Feb. 26.

Agence France-Presse/Getty Images

Roberto de Ocampo, a former finance secretary, cited two extreme examples of how slow decision-making has obstructed much-needed infrastructure projects.

He said he’d been party more than a decade ago to the original discussions about a new metro rail line in Manila, the MRT-7, which the government is still examining.

He also recalled consultations in the 1990s about turning the former Clark U.S. airbase – now a regional airport – into a major international transport hub. The project is once again being touted as a possible solution to the country’s shortage of air transport capacity, Mr. de Ocampo noted.

There are, however, some encouraging signs of progress, said business leaders at the report launch.

According to a program laid out by the Joint Foreign Chambers in 2010 to monitor reforms, the government is making progress on the majority of more than 450 recommendations put forth by its members.

Known as Arangkada Philippines, or “Moving the Philippines Forward”, the report highlighted areas where reform would have a positive impact on the country’s business environment. Proposals ranged from implementing e-governance to strengthening anti-corruption legislation to privatizing more state assets.

Manila had made some progress on roughly half the proposed reforms in 2011, a year after the recommendations were released. By last year it had begun to address nearly 75% of those reforms, the report said.

The findings demonstrated that the Philippines is implementing a wide range of structural reforms that should enable it to unlock some of the economic potential to which Mr. Porter referred.

Other organizations have also recognized some of Manila’s reform efforts. In October, the Philippines was named the world’s most-improved country in the latest Ease of Doing Business Report released by the World Bank and the International Finance Corporation, jumping 30 places to No. 108, out of 189 countries.

That ranking remains low, however, and other business leaders say the country still has serious issues to address when it comes to starting a business.

“It takes too long to get anything done here,” said Guillermo Luz, co-chairman of the National Competitiveness Council, a public-private task force set up by the government in 2006 to help improve the country’s lackluster business environment.

In particular, he cited the ease of starting a business: On this score, the Philippines ranks a dismal 161st out of 170 in the World Bank/IFC league table.

The Philippines needs to redouble its reform efforts if it wants to overtake regional rivals for investment like Indonesia and Vietnam, which are themselves making improvements, he said.

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